An embryo custody case that even Solomon couldn’t resolve

An embryo custody case that even Solomon couldn't resolve

Gary L. Schlesinger
Illinois Fellow
American Academy of Matrimonial Lawyers
October 2022
Egg being fertilized

Our society strongly encourages the rights of both parents in raising a child. But what happens when that child is only a gleam in a lab technician's eye?

This question rests at the center of the Second District Illinois Appellate Court decision In Re the Marriage of Eneya Katsap and Alexander Katsap, which was decided in August 2022. It's the first Illinois case in several years to deal with embryos, and it cries out for clarification from the Illinois legislature.

The Katsaps were a married couple living in Israel, where they created embryos using in vitro fertilization in 2013. When they subsequently moved to upstate New York, they placed the frozen embryos in storage at the New England Fertility Institute in Connecticut. In 2015, they filed a contract with the institute stating that, if the parents were to divorce, Eneya would gain custody of the embryos.

The Katsaps became parents to a child using one of the embryos and a surrogate birth mother. Eneya—who is medically unable to bring a child to term— had planned to have another child via surrogacy. But in April 2020, Eneya took their child and moved to Naperville, where her parents lived, and then to Buffalo Grove; she did not inform Alexander of either location.

The couple soon separated and Eneya claimed the remaining embryos under the contract filed with the fertility institute. But Alexander denied signing that contract and testified that in the event of separation or divorce, they actually had agreed to donate the embryos. And in what had become an acrimonious dispute, he definitely did not want them going to his ex-wife.

The original trial court in DuPage County sided with Alexander, granting him "exclusive possession and control of the embryos." The Second District Appellate Court said, "Not so fast," and cited precedents for three methods in which courts have dealt with cases involving frozen embryos:

  1. The court simply can enforce the original contract filed with the fertility institute, in this case giving the embryos to Eneya.
  2. The parties can mutually consent to scrap the earlier contract and maintain the status quo, in this case leaving the embryos in storage.
  3. The court, in the absence of an enforceable agreement, can use a balancing approach to weigh the separate parties' interest "in seeking or avoiding procreation."

In August 2022, the Appellate Court chose the third option, and applied a test to balance the rights and privileges of the former spouses. Relying on the only Illinois precedent for such a test, the Court gave the embryos to Eneya, deciding that her "interest in...procreation." This decision was colored by the fact that she cannot have children on her own (or even produce more eggs) and that the embryos represent her only chance at more offspring. In addition, these facts outweigh Alexander's interest in removing the embryos from her possession.

This raises a further question.

If the mother implants the embryo, is the sperm donor (Alexander) responsible for child support and other duties? Two Illinois statutes come into play here. The Appellate Court cited one of them, the Gestational Surrogacy Act, in concluding that the husband is not an “intended parent,” and thus not liable for support. As a gamete donor, however, he is indeed a parent under the Parentage Act, and thus liable for support—unless he reaches an agreement with Eneya relieving him of that responsibility.

Given the bitterness between these parties, such a compromise seems unlikely. And should Eneya herself decide to donate the embryos—and neglect to inform Alexander—how would he even learn if one of their children has been born?

A divorce already contains enough emotional issues; the presence of frozen embryos complicates things exponentially. The legislature must address the issues raised in this case via the Illinois Marriage and Dissolution of Marriage Act (IMDMA), as well as the Parentage and Surrogacy Acts. These are sturdy pieces of state law, in part because they remain flexible to amendment by the legislature. If nothing else, the details of the contract originally filed in Connecticut provide a cautionary tale for attorneys in Illinois and across the nation.

The Katsap case, now on its way to the Illinois Supreme Court, underscores the need for further clarification.

(The author has no involvement with the case described here.)

Gary Schlesinger

Reach him at and 847-680-4970.

The Impact of Inflation on the Division of Assets for Small Business Owners

The Impact of Inflation on the Division of Assets for Small Business Owners

Jennifer Fletchall
Illinois Fellow
American Academy of Matrimonial Lawyers
April 2022
Division of Assets in a small business

The United States has hit the heights. That's not a good thing.

In 2022, the annual inflation rate in the U.S. accelerated to 7.9%— the highest since February of 1982. (Keep in mind that in developed countries, including the U.S., anything above 4% is considered "high.") And inflation is predicted to increase in coming months as we start to feel the impact of the war in Ukraine and the world's sanctions against Russia.

Inflation is the rate at which the value of the dollar falls at the same time that the price of goods and services is rising. This reduces purchasing power. The math is pretty straightforward. Higher costs for businesses lead to increased prices, which raise the cost of living. This in turn may lead to demand for higher wages, which results in worker shortages if employees leave for better pay from a competitor. These shortages can force businesses to offer higher wages to entice workers to return—which means higher costs. And the cycle begins again.

From a macro-economic standpoint, as prices rise, the value of a country's currency begins to decrease. But inflation also can quickly filter down to individual households, where the largest assets are the marital residence, retirement accounts and businesses—all of which must be properly valuated during a divorce settlement.

To gauge the impact of inflation on a personal level, just check your retirement account balance; if it's lower than it was three months ago, inflation is most likely the cause. Inflation also can reduce the value of the marital estate; the future cost of consumer spending; the value of spousal maintenance; and especially the value of the small business that has supported the home and purchases over the years. (All of these factor into the division of assets.)

For a small business, inflation's effects may not immediately be obvious.

  • Inventory Costs. Inflation causes businesses to pay more for inventory as well as materials. If these costs cannot be met, it can lead to an inventory shortage.
  • Employee Wages. When the price of goods increase, employees will want a higher wage. If a company is unwilling or unable to increase wages, talented employees may leave.
  • Consumer Purchasing. Another consequence of rising prices: the number of consumers buying those goods decrease.
  • Investment. To correct inflation, the Federal Reserve hiked interest rates in mid-March, for the first time in three years. Higher interest rates often deter business owners from borrowing money for investments in equipment and facilities.

To achieve an equitable appraisal, business owners should strongly consider employing a business valuation expert, who will typically choose one of three methods: the Asset Approach, the Market Approach or the Income Approach. Most of these experts, when valuating a small business for a divorce settlement, will choose the Income Approach. It includes an analysis of the business’s cash flow over the last five years, as well as projections of future cash flow. Notably, the business valuation expert also will determine the impact of inflation, along with other factors, on that cash flow.

Inflation impacts the value of a business primarily in three areas.

  1. It can alter the risk-free rate, which is used in calculating the cost of equity. As the name suggests, the risk-free rate is the rate of return an investor would expect on an investment that has no risk. It is determined by using the interest rate on a Treasury Bill, a very safe investment since these are backed by the government. As interest rates rise, the risk-free rate will also rise—which, all other things being equal, would decrease the value of the business.
  2. Inflation may also affect the after-tax cash flow of a business. If a business incurs additional costs due to inflation—and if revenue does not rise accordingly—a business’s after-tax cash flow will decrease. Again, all other things being equal, this can decrease the value of the business.
  3. Finally, inflation can change the effective tax rate paid by a company. Take the example of a company that deducts depreciation expenses related to newly purchased equipment. If decreased cash flow (or lack of funds) prevents the business from making such purchases, it will have no new assets to depreciate; the company then loses the opportunity for pre-tax depreciation. Inflation is the root cause, and this too will reduce the business’s value.

Inflation not only afflicts individual consumers faced with higher prices at the grocery store, the gas pump and the mall. It also affects small businesses that already are walking the tightrope between increased costs and maintaining profitability. If the business owner is in the process of obtaining a divorce, inflation must be considered in calculating the value of the business—and, correspondingly, the value of the marital estate—to arrive at a fair and equitable conclusion.

Jennifer Fletchall

©2022 Illinois Chapter of the American Academy of Matrimonial Lawyers